CEO Statement Year-end Report 2021

Strong close to an eventful year

Our focus on profitable growth, development of the core operations and expansion on adjacent market segments has paid off.

The year was characterized by a positive growth trend that continued into the fourth quarter, with revenue up by 19% year-on-year. This was due to the strategic measures we have implemented which have generated strong sales in Europe, as well as the first delivery of synchronization products for Türk Telekom, within the framework of the agreement signed at the end of 2021.

Operating earnings were up significantly in Q4 compared to the corresponding period in the previous year, but down on the preceding quarter. This was largely due to costs associated with the establishment of the collaboration with Türk Telekom and the start-up of the new synch product, which meant that we started to strengthen our resources in development, support, marketing and sales in the quarter.

Looking back on the year, growth was higher compared to the target of average annual growth of at least 10%. This was due to strong progress in the media business, where sales increased with 8 of 10 of our strategic customers, plus the Türk Telekom agreement. The operating margin did not reach the long-term target of at least 10% on average over the period. Margins were affected by our ambitious investment in IP and cloud, and our focus in synchronization, which will contribute to reaching our target margin.

The repurchase program of own shares, which was decided at the 2021 Annual General Meeting, commenced in November and will last until the 2022 Annual General Meeting. Until the end of the year, shares amounting to a total amount of SEK 33.4 million have been repurchased.

Strategic measures implemented according to plan
The agreement with Türk Telekom is part of our strategy of increasing the growth potential through expansion on new and adjacent markets. This includes the development of an entirely new product based on our existing synchronization technology. Net Insight is once again demonstrating the company’s strong ability to commercialize its leading-edge technology. The agreement represents a milestone that opens up new opportunities in the rapidly expanding 5G segment.

Another cornerstone of Net Insight’s strategy is the expansion of its core media operations. Accordingly, we have divided the portfolio into three areas: IP Gateways, Nimbra MSR and Cloud. Within IP Gateways, we are continuing to invest in the Nimbra 1000 series, which has strengthened our position and where we, alongside Aperi, are now seeing increased sales volumes.

The other product area Nimbra MSR is standing up well with its robust transport solutions for live events with demanding standards and where we help customers upgrade with important new functionality. One of these products was launched in Q4, the JPEG XS solution for simple video compression with low latency and high quality.

In the third area, Cloud, Nimbra Edge has taken the lead in cloudbased media solutions, also a sector undergoing rapid development. We currently have around 10 active Nimbra Edge customers: service provider The Switch with its production platform MIMiC; LinkedIn with video production; and Swiss TV company SRF with productions such as the Alpine World Ski Championships.

New pricing model for stable revenue streams
We have actively sought to increase the share of recurring revenue streams, and introduced user-based license models in the spring. The new pricing model provides Net Insight with stable revenue streams over time, and offers our customers more choice. We are now starting to see an increase in the number of Nimbra Edge customers.

Components shortages continue to generate uncertainty
Components shortages continue to generate uncertainty, and while this has previously only affected our customer deliveries marginally, in Q4 we started to see a more significant impact. We expect increased uncertainty in the first half of 2022. We foresee continued price increases for some component categories in 2022, and have adjusted prices from 1 February to offset this.

Stable foundation for growth
We consider that we have outgrown the market. During a time shaped by uncertainty, I am proud that our sales curves are pointing upwards for both IP and cloudbased solutions, particularly because we have signed a historic agreement relating to the development of an entirely new synchronization product for 5G on the global market. We are looking back at an eventful and promising year.

I want to thank all our employees for their amazing endurance and commitment, which has led us to end the year on such a great note.

Solna Sweden, February 22, 2022

Crister Fritzson, CEO